Non-fungible tokens are selling for thousands or even millions of dollars. But why are they so valuable? what gives an NFT value?
Value of Ownership
NFTs are providing proof of ownership over digital assets through the use of blockchain. Each NFT contract contains a token ID number and following this, an address that belongs to the owner.
NFTs are a completely novel asset class. The tokens are cryptographically unique, and cannot be replicated or copied since they are stored on the blockchain, a web of public ledgers that track both provenance and transactions. Nobody owns or commands this Blockchain. And because their records are public, anyone can find out who's owned the NFT, its sales history, and when it was first minted. As a result, we can quite easily know what is authentic, and what is fake, and thereby we can attribute value.
Value of Membership
Many NFTs serve as membership passes to a community. For example, anyone who can prove that they own a Bored Ape Yacht Club NFT is welcomed into a community where they can take part in a private Discord, network with other BAYC holders including celebrities ranging from Snoop Dogg to Paris Hilton. and receive invitations to social events.
Value of identity
We share something about ourselves with the digital world through NFTs. The usage of NFTs as a digital identity has become popular among collectors; a Bored Ape or CryptoPunk becomes intertwined with how the owner sees and represents themselves to others. Additionally, it serves as a powerful networking tool by confirming the holder's membership in the NFT community.
Scarcity and rarity
For the first time, digital art can be related to scarcity; the NFT's value may increase as a result of the limited supply. For example, 1/1s appear to be more valuable than an NFT from a collection of 10,000 given that there will only be ever be one of the NFT in existence. Collectors find beauty in the number or size of a collection. Rare traits can also lend value to an NFT; the scarcer the rarity, the higher it will be valued.
Influence and memes
Value can be arbitrary; something may suddenly gain value without any reason why. But more often than not, there's something that acts as a catalyst, and it can be the result of an outside force. Consider the Crypto Skulls collection, which had been around since 2017 but had gone unnoticed until NFT influencer Gary Vee swept the floor and started a wave of buzz that sent floor prices rising to 4 ETH in less than a day. Value is not solely determined by the work; it is also influenced by people and their influence.
NFT investor Nick Tomaino said, "What's happened in the past year or so, with meme stocks, meme cryptocurrencies, and NFTs, is that random people on the Internet don't really care what the institutional establishment says is valuable." He added, "If the collective group of people on the Internet believes something has value, it has value."
Value of royalties
Web3 and NFTs ensure that the art is essentially their creation and that ownership only changes when it is transferred, in opposed to the web 2.0 world where artists must rely on copyright rules to prove ownership of their work.
Value of utility
The NFTs with the most traction are those that provide value through airdrops, access to real-world events that are only available through the NFT, metaverse access, governance through DAOs, or even possibilities to mint other projects.
I hope now you know what gives an NFT value.
